What Is Socially Responsible Investing?

Happy Thanksgiving Monday afternoon. While you are recovering from the holiday meal make sure to check out our post from this morning HERE. We’re trying to find the perfect kitchen counter compost bucket – a hot topic now that the temperatures outside have cooled and the veggie scraps are plentiful.

This afternoon we are excited to introduce readers to Comox Valley investment broker Anthony Edwards. He specializes in ethical investing and his new monthly column – The Green Wallet – will dig in to the hot issues of the effects that what (and where) we buy has on the local, national and global community. Enjoy!

Well we all want to change the world, right? Even just a little bit. You find expression for your values when you go shopping. You want to buy local, or organic; energy-efficient, hand-made, or free range. You don’t make these choices because they are necessarily cheaper, but because they are healthy choices, or because you feel it’s just the right thing to do.

You may support local food producers instead of big agribusiness, or buy a hybrid vehicle because it will lessen your carbon footprint, or make purchasing decisions that take a stance against child labour, or support the human rights of indigenous peoples in faraway lands. You know every dollar you spend represents a ‘vote’ on the way business conducts itself.

Regrettably, it is not yet commonplace for people to express these same values when they save or invest, at least not here in Canada.

But this is the flip side of the spending coin. It is what we choose to do with the money we earn, and another significant opportunity to ‘vote’ on the way business and corporate interests behave. This expression has its roots in the campaign to divest from businesses that cozied up to the apartheid regime in South Africa in the 70’s, and has come to be known as ‘Socially Responsible Investment’ (SRI).

Socially responsible investing can be a complex matter and one that means something unique to each of us. At the most basic level it can mean screening out companies that you find objectionable, but have found a way into your RRSP or mutual fund. These may be companies with poor human rights or environmental records, or perhaps ones that are involved in weapons manufacturing or sub-contracting.

SRI also means investing in companies whose practices one wishes to support and encourage, like those that produce clean, sustainable energy, or technologies that lead to greater energy efficiency, or businesses that create jobs close to home. You may want to emphasize community investments in your portfolio, or perhaps you would like to use your shareholder voting rights in an attempt to positively influence corporate behaviour.

These are all aspects of socially responsible investing.

Although the Canadian SRI market is nowhere near as developed as in the US or Europe, there are still plenty of places to align our investments with our values. Here in BC one can invest in ‘green’ mortgages that are used by conservation organizations to protect sensitive BC habitat.

There are various opportunities to earn significant tax relief by investing in funds that incubate and grow small start-up businesses here in BC. And there are publicly-traded, world class technology companies right here on Vancouver Island, producing solar power collectors and low energy LED lighting. Look further afield, and you’ll find a dazzling array of socially responsible, or ethical, or green investments.

Still, the feedback I have received from many of my clients indicates a belief that many so-called socially responsible funds could go further in screening out companies that investors find objectionable. “Just what are these banks and oil companies doing in my portfolio” is a question I often hear, and it’s a good one.

The approach of the many SRI fund managers is often to include companies that may be operating in an inherently ‘dirty’ industry, but which have adopted the best practices in their sector. Suncor Energy, for example, has a significant stake in the Athabasca tar sands project, yet they are also industry leaders in responding to the Global Reporting Initiative, are actively developing alternative energy sources, and have an excellent record of working with aboriginal communities affected by resource extraction. Remember, SRI is a highly personal endeavour. It’s your dollar, your vote, and business is watching very carefully the choices you make.

So where to start?

If you own any kind of mutual fund that is not screened according to SRI guidelines, chances are you will be a shareholder in Monsanto, or Exxon, or Raytheon the cruise missile-maker.

If you have the time, and the knowledge, and the desire, you can manage your own accounts through an online bank or brokerage. However most people I know have a variety of accounts – RRSPs, RESPs, perhaps Locked-In Retirement Accounts from a previous employer, Tax Free Savings Accounts and often non-registered investment accounts too. Most are simply unwilling, or unable, to take responsibility for the many considerations in managing their investments.

So the first thing to do is to make an appointment with the person listed on your statements as being advisor on your accounts.

Don’t be afraid to ask some hard questions. They can dig into an annual report for you to look for the missiles and genetically modified organisms. In the process of safeguarding your savings that’s what they get paid to do.

Gauge your advisor on their receptiveness towards retooling aspects of your investments that leave you feeling queasy. Ask them what options you have, as some advisors are restricted to dealing only with their firm’s own products. Find out if there are any hidden costs or tax implications to making changes. Know your appetite for risk and volatility in the value of your investments. There are many alternatives to the stock market.

In future columns, I’ll drill down into many of the practical aspects of SRI to give you an idea of trends, and possibilities, and resources you can use to help you further an investing revolution. And you may say I’m a dreamer, but I’m not the only one:) (Thank you, Beatles)

The information presented is for information purposes only, and is not to be construed as advice to purchase or sell any security, whether specifically mentioned or not. Mutual funds are not guaranteed, their value changes frequently, and past performance may not be repeated. Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. Before investing, please read the simplified prospectus of the mutual funds in which investments may be made.

Photo courtesy of B. Clempson

Tags: Anthony Edwards, Canadian SRI market, family, green, green investments, investments, Our Big Earth Media Co., parents, retirement, social responsibility, socially responsible funds, socially responsible investing, SRI fund

Category: Finance & Investment, THINK GREEN